Common Investment Pros & Cons

In my service career, I have found that there is very limited guidance available to a young officer who starts his service journey. Though all kinds of professional and personal guidance are given to one by his seniors/peers, financial guidance is something that not everyone gets when one starts earning. One of the reasons is because many people themselves are not very clued up due to a lack of guidance. Of course, I have seen people with very good finances and planning as well. Also in the initial few years of service one is really busy due to on the job training, work pressure, service commitments, courses etc. By the time one takes a stock of his financial position, he/she is already 7-10 years in career. At this point there are pressing family expenses, house loan, car loans etc which does not leave much room for spare income to invest and also the risk-taking appetite reduces. Often people follow the herd mentality and just do what others around are doing. Some people do learn after making mistakes in the initial years of their service and they wish somebody told them about it before. Of course, this is not the case with everyone but I found this to be the case with many. Not that they wanted the situation to be like this but just that nobody guided them. This section is meant to educate newly commissioned officers about the most common investments avenues, their Pros and Cons. Though this section was written primarily for young defence officers but its holds good for any one who starts to earn and will be an eye-opener for most others as well.

Why Is It Important To Invest Wisely

To gain Financial Independence and to benefit from the power of compounding. If your money is growing at 7% per cent in your savings, it is just about retaining its value( it still isn’t growing after adjusting for inflation). If your investments are earning just about 8% they are hardly growing after adjusting for inflation. So it is important to deploy your hard-earned money in avenues where it grows even after beating inflation.

The Mistake That Many Make

I have seen that many youngsters when they get commissioned, they are looking for advice as to where to invest their money. Many of them go to Banks, thinking the Bankers are the most financially literate people and end up getting an Endowment Insurance Plan(we will talk later as to why they were given this). I will just give an example here. One of my friends was looking to save 1.5 Lakh under 80C to save income tax. He went to an SBI bank and asked them he wants to invest to save tax under section 80 C. The banker quickly handed him over an endowment policy( Don’t know what endowment policies are? We will discuss that subsequently in this article). So my friend happily goes back home thinking he will now save 50 K of income tax per year( he falls in the 30% tax bracket). But my friend never thought what returns the Endowment plan would fetch him. Neither was he aware of the insurance cover provided by the Policy or if the cover would suffice for him or if he actually needed any additional cover since he had one from the company. Most people bet on bankers. Isn’t Bank the most commonly visited financial institution for our most common need that is banking?. That is usually the place for many to pick a financial product. What the Banker says seems gospel truth to many of us. After listening to any financial advice by a commercial/non-commercial person always go back and Google about that particular investment option. You will find lots of information in blogs and articles by people narrating their personal experiences. This will help you decide whether that investment option is right/wrong. ( Don’t we compare cars/mobiles and other items on the internet before purchasing or we just believe in what the salesperson is saying?). Never be in a hurry to buy an investment product based on somebody’s advice. Always request for a brochure of the financial product. Go back home, take time to check back the performance facts that were told to you. Use google to check the following if it is a good investment option, compare it with other options, see its long term returns-(10-15 yrs). See if the product has any lockin period. If everything’s good then you can go back and opt for that particular investment option.

Understanding The Most Common Investments, Their Pros And Cons: